Blog Post

Compliance and Cash-Based Physical Therapy Services

Cash-based physical therapist Ann Wendel debunks three big myths surrounding Medicare for cash-based private PT practices.

Ann Wendel
5 min read
July 28, 2014
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Many therapists I speak with mistakenly assume that cash-based practice owners don’t need to worry about compliance issues. This faulty assumption could get you in trouble if you plan on offering cash-based physical therapy services in your practice. Here, I’ll address three common compliance myths regarding cash services.

Myth #1: You don’t need to worry about billing codes and documentation.

Truth: You may be shocked to know that my documentation and billing practices are not that different from yours. The end goal of billing is to get paid. In my case, though, it’s the patient who is waiting for payment. I’m required to document evaluations and treatment visits just like any other physical therapist. I include the patient’s ICD-9 code, as well as the CPT codes for the treatment provided, on each invoice.

The advantage of being cash-based is that I enter into a contract with the patient to provide physical therapy services in a manner I’ve determined to be most efficient in helping the patient reach his or her goals. The key point is that my documentation and billing practices must ultimately lead to the patient being paid; otherwise, he or she will not be able to continue treatment with me. (To learn more about my billing workflow, check out this blog post.)

Myth #2: You can treat Medicare patients “out of network.”

Truth: Even though I have written extensively on this topic, therapists I work with on a consulting basis still ask me questions about it quite frequently. Physical therapists are not permitted to “opt out” of Medicare. What this means in practice is that you have one of three options for your relationship with Medicare:

  1. You are a participating provider and submit claims to Medicare for reimbursement of covered services. (Some cash-based practices are participating Medicare providers, even though they do not accept any private insurance contracts.)
  2. You are a non-participating provider, which means you can accept cash payment at the time of service, but you still must send the claim to Medicare. The patient will then receive reimbursement from Medicare.
  3. You have no relationship with Medicare, which means you can accept self-payment from a Medicare patient only if Medicare has designated the service as non-covered. For the cash-based practice, this situation usually occurs when a Medicare beneficiary seeks fitness or wellness services, which are not normally covered by Medicare. (For example: a patient who has had a total knee arthroplasty (TKA) and has been discharged from physical therapy, but whose ultimate goal is to return to tennis. In this case, you could provide general fitness training to help the patient reach his or her goal.)

Jarod Carter has written an detailed summary of this information in this blog post. When we first started our respective practices, Jarod and I spent several months doing detective work to get answers to all of these questions, comparing notes to be sure the information was accurate.

Myth #3: If you have contracts with certain insurance companies, you can allow patients with that insurance to pay cash for services at your going rate.

Truth: This gets tricky. If your clinic participates with third-party payers, you need to check your clinic’s contract with each of these companies to determine whether you can allow patients to pay cash. Some contracts stipulate that you cannot accept cash payment from patients with that insurance, meaning you must bill the insurance directly. Other contracts allow you to accept cash payment, but it cannot be  above or below the amount you would charge the insurance company. You must also be aware of any state laws that would prevent you from accepting cash payment from patients. My best advice is to read through your insurance contracts with your attorney and discuss any state laws that may impact pricing. If you are slowly transitioning your clinic to a cash-based model, you must pay close attention to these issues.

In the current healthcare climate of declining reimbursements, many clinic owners are looking into adding cash-based services and/or transitioning to a fully cash-based practice. In doing so, though, it’s crucial that you are able to separate fact from fiction. What other “rumors” have you all heard? Post them in the comments section below, and we’ll debunk them together. Also, I discuss the above issues and more in my webinar, Creating Your Cash-Based Practice. I hope you check it out.


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